Seeking your support for our work to effect relief from the burdens of FATCA
Following on from our March 2014 meetings with US regulators and legislators (link to report on website), the Democrats Abroad FBAR/FATCA Task Force has invested the last 6 weeks (exempting the Easter break) taking advice from academics and experts to create the survey for DA’s next round of international research on the unintended adverse impacts of the Foreign Accounts Tax Compliance Act (FATCA). We continue to receive reports from overseas Americans who are being denied banking and investment services in their country of residence due to the reporting requirements imposed on Foreign Financial Institutions by FATCA.
We are about six weeks away from the 1 July date for full FATCA implementation. Countries across the globe are moving quickly to confirm their compliance with the law (see “IGAs” below) and so foreign banks and brokerage houses are scurrying to establish a compliance regime to avoid serious penalties. In some instances, it seems that compliance regime includes ending banking and brokerage arrangements with American customers. We need to understand this response as clearly as possible in order to demonstrate that reform is urgently needed to exempt Foreign Financial Institutions and Americans living abroad from FATCA reporting requirements for accounts in the American citizen’s country of legal residence (also known as the “Same-Country Exemption”).
The forthcoming 2014 FATCA Survey will enable us to provide regulators at the US Treasury and the IRS and lawmakers in both Houses of Congress with a picture of which Americans (younger; older; richer; poorer; etc) in which countries are being denied which sort of banking or investment services, and, hopefully, why. We are inviting those who have been denied accounts or had accounts closed to send us a copy – with account holder information redacted – of the notification they received alerting them to the account closure/denial of service.
We anticipate rolling out the survey across multiple platforms in the next week or so. We strongly urge you to participate in this research, share the link to the survey across your social media networks and forward it to the Americans you know who are living outside the U.S.A. The survey is anonymous.
IGA’s: Countries around the world signing up with the U.S. to implement FATCA
In order to implement FATCA, the U.S. Treasury is signing Intergovernmental Agreements (IGAs) to facilitate the submission by foreign banks and brokerage houses of U.S. citizen financial account information. In some countries, the national government will collect from its financial institutions the financial account information of U.S. citizens in their country, and will share the account information with the U.S., which will reciprocate (Model 1). In other countries, financial institutions will report the financial account information of U. S. citizens directly to the IRS - without the national government acting as the middle man (Model 2).
In countries that have not as yet signed an IGA with the US government, banks and brokerage houses will need to register with the IRS or risk heavy withholding charges on payments from the U.S.
The IRS announced on April 2nd that countries that have in-principle agreements in place for the implementation of FATCA will be deemed to have IGA-type arrangements in effect. If you are interested to know where your country of residence stands, this is a list of countries which have, or are being treated as having, IGAs in place.
Stepped up tax enforcement going global
FATCA has generated huge international interest in tax information reporting because governments throughout the world are looking for ways to increase tax collection. We can expect many countries to take new measures to improve tax enforcement.
The difference, of course, is that the U.S. government is alone (but for Eritrea) in taxing citizens on their world-wide income. Expatriate citizens of other nations will not be the target of stepped-up tax enforcement efforts; the focus will be on their compatriots back home who have undisclosed holdings in accounts held abroad. The focus of US efforts should be the same; it should be on the U.S.-based “1%’s” who have untaxed earnings hiding in undisclosed offshore accounts. Democrats Abroad supports U.S. efforts to discourage and apprehend tax cheats and we are working hard to secure the “Same-Country Exemption”. It will relieve overseas Americans and their banks from reporting on the ordinary, essential financial accounts they have in their country of legal residence.
As we posted recently, reform discussions with Treasury and the IRS are complicated and they require relentless levels of persuasion. Our March discussions on Capitol Hill suggest that there is broad Congressional support for the Same-Country Exemption. Converting that "support" to pressure on the Treasury and IRS regulators is our current task.
Our research into FATCA's impacts is critical. Please support our work if you are interested in effecting relief for Americans living abroad from the burdens of FATCA compliance. Please contact us at any time with questions on [email protected].
Democrats Abroad FBAR/FATCA Task Force
20 May 2014